Asia BD prices rebound as cracker operators cut run rates

10 December 2012 04:56[Source: ICIS news]

SINGAPORE (ICIS)--Spot butadiene (BD) prices in Asia have rebounded to above $1,500/tonne after falling since late September, as major cracker operators cut their operating rates to tighten supply and stem the price decline, industry sources said.

In the week ended 7 December, BD spot prices were at an average of $1,510/tonne (€1,178/tonne) CFR (cost & freight) northeast (NE) Asia, after bottoming out on 30 November at an average of $1,470/tonne CFR NE Asia, according to ICIS data.

However, with BD supply likely to tighten in the coming month, market players expect prices to rebound for January shipments, although suppliers anticipate the rebound to be moderate, given the lacklustre downstream synthetic rubber market.

“We expect BD prices to rebound and we are targeting more than $1,600/tonne CFR NE Asia for January shipments,” a BD supplier said.

Major cracker operators including South Korea’s Yeochun NCC (YNCC) and Taiwan’s Formosa Petrochemical Corp (FPCC) have cut the operating rates of their crackers by 5-10 percentage points in December, industry sources said.

YNCC has reduced the operating rates of its three crackers in Yeosu to 90% of capacity in December from 100% in November. The company’s three crackers at the site have ethylene capacities of 857,000 tonnes/year, 578,000 tonnes/year, and 450,000 tonnes/year. It has a 240,000 tonne/year BD extraction unit at its 857,000 tonne/year No 1 cracker.

FPCC has cut operating rates at all three of its naphtha crackers at Mailiao by 5 percentage points to 85% on 1 December, a company official said. FPCC was operating its 700,000 tonne/year No 1 cracker, the 1.03m tonne/year No 2 cracker and the 1.2m tonne/year No 3 cracker in Mailiao at 90% in November. FPCC has BD capacities totalling some 450,000 tonnes/year at its three crackers.

Adding further upward pressure on BD prices is the limited spot availability of deep-sea cargoes from Europe, traders said.

“Buyers may wish to buy BD at below $1,500/tonne CFR NE Asia, but no trader will sell at below this price level for January shipments,” a buyer said.

Spot offers for January shipments rose to $1,500-1,560/tonne CFR NE Asia as supplies are expected to tighten following the diversion of deep-sea cargoes from Europe to the US.

Several thousand tonnes of BD from Europe, which were originally slated to head to Asia, have changed course and are heading to the US because of better margins in the US, industry sources said.

Higher freight costs from Europe to Asia as well as lower spot prices in Asia have made it untenable for cargoes from Europe to head to Asia, industry sources said.

“With freight costs from Europe to Asia at $400-450/tonne, European BD suppliers will ship their cargoes to the US rather than Asia, given the lower freight costs to the US and obviously better margins in the US market,” a trader said.

In the week ended 7 December, BD spot prices in Europe were at $1,150-1,200/tonne FOB (free on board) ARA (Amsterdam, Rotterdam, Antwerp), according to ICIS data.